UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
IN THE
COUNSEL
Burch & Cracchiolo, P.A., Phoenix
By Jake D. Curtis, Daryl Manhart, Melissa Iyer
Counsel for Plaintiff/Appellee
Kutak Rock LLP, Scottsdale
By Paul S. Gerding, Paul S. Gerding, Jr., Andrew J. Russell
Counsel for Defendant/Appellant
MEMORANDUM DECISION
Judge John C. Gemmill delivered the decision of the Court, in which
Presiding Judge Patricia K. Norris and Judge Lawrence F. Winthrop joined.
G E M M I L L, Judge:
1
Defendant/Appellant Wells Fargo Insurance Services USA,
Inc. (Wells Fargo) appeals a judgment entered upon a jury verdict in
favor of Plaintiff/Appellee Deepwater Divers, Inc. (Deepwater). The jury
found against Wells Fargo on claims of breach of contract and negligence.
For the reasons that follow, we affirm in part, reverse in part, and remand
for further proceedings consistent with this decision.
BACKGROUND
2
Deepwater is a California-based company that provided
commercial diving services. In September 2006, Wells Fargo provided
brokerage services to help Deepwater obtain necessary commercial liability
insurance. Those policies terminated in September 2007, and Deepwater
did not renew them. At the time of termination, Deepwater owed $7500 in
unpaid premiums on an umbrella policy purchased through Wells Fargo in
May 2007.
3
In February 2007, Deepwater signed a Master Services
Agreement (MSA) with Badger Oil Corporation. The MSA allowed
Deepwater to submit bid proposals for jobs with Badger Oil, and in October
2007, Badger Oil accepted Deepwaters bid on a large-scale diving project,
worth $291,000 in gross revenue to Deepwater. In accordance with the
MSA, Deepwater was required to maintain various insurance policies,
including comprehensive general liability and umbrella liability coverages,
and to have Badger Oil named as an additional insured on all policies.
4
In order to obtain the necessary insurance, Deepwater again
engaged the brokerage services of Wells Fargo. On October 15, 2007,
Deepwater emailed Wells Fargo representative Greg Golucci to inform him
that the Badger Oil job was going forward. In that email, Deepwater
attached the portion of the MSA that outlined the insurance requirements
for the Badger Oil job. On October 24, Deepwater wired the $7500 needed
to pay the premiums outstanding on its prior policy. In a telephone
2
8
Wells Fargo argues that the trial court erred when it denied
its motion for summary judgment. However, the denial of a motion for
summary judgment is not a final order under A.R.S. 12-2101 and
therefore is generally not appealable or subject to review after judgment.
Martin v. Schroeder, 209 Ariz. 531, 533, 5, 105 P.3d 577, 579 (App. 2005).
Accordingly, we need not address directly whether summary judgment
was properly denied.
II.
9
Wells Fargo also claims that the trial court erred in denying
its motions for judgment as a matter of law (JMOL) and renewed JMOL.
We review de novo a trial courts denial of JMOL. Felder v. Physiotherapy
Assoc., 215 Ariz. 154, 162, 36, 158 P.3d 877, 885 (App. 2007). A motion for
JMOL may be granted when there is no legally sufficient evidentiary basis
for a reasonable jury to find for that party on that issue. Ariz. R. Civ. P.
50(a). Because in considering a JMOL motion, a trial court should apply
the same test for deciding whether to grant a motion for summary
judgment, we consider Wells Fargos legal arguments in support of its
motion for summary judgment as relevant to its JMOL motion. See Crackel
v. Allstate Ins. Co., 208 Ariz. 252, 25960, 20, 92 P.3d 882, 88990 (App.
2004).
A.
10
First, Wells Fargo claims that no contract existed between the
parties, arguing Deepwater offered no evidence that the parties reached any
agreement as to the carrier of insurance, duration of coverage, or amount of
premium. In the absence of any specific terms, Wells Fargo asserts that any
agreement between it and Deepwater was merely conditional and
incapable of sustaining a breach of contract claim. Deepwater argues that
it did not need to present any such evidence and alleges instead that the
parties entered into a valid contract to procure insurance, not for insurance
itself, and that Deepwater suffered damages when that contract was
breached. The question before this court, then, is whether a reasonable jury
could have found that Deepwater proved the existence of an agreement
capable of sustaining a breach of contract claim.
4
11
To determine whether a claim based on a breach of duty
sounds in contract, this court looks to whether the defendant would have
a duty of care under the circumstances even in the absence of a contract.
Premium Cigars Intern., Ltd. v. Farmer-Butler-Leavitt Ins. Agency, 208 Ariz.
557, 568, 33, 96 P.3d 555, 566 (App. 2004) (quoting Ramsey Air Meds, LLC
v. Cutter Aviation, Inc., 198 Ariz. 10, 15, 27, 6 P.3d 315, 320 (App. 2000)),
abrogated on other grounds by Webb v. Gittlen, 217 Ariz. 363, 174 P.3d 275
(2008). If the obligation of the party would have arisen even without a
contract in place, then the obligation sounds in tort and will not support a
breach of contract claim. Id.; see also Barmat v. John & Jane Doe Partners AD,
155 Ariz. 519, 523, 747 P.2d 1218, 1222 (1987) (explaining that where the
implied contract does no more than place the parties in a relationship in
which the law then imposes certain duties recognized by public policy, the
gravamen of the subsequent action for breach is in tort, not contract).
12
When an insurance broker undertakes to procure insurance
coverage, it incurs a duty to the insured to exercise reasonable care, skill,
and diligence in seeking out the policy. Premium Cigars, 208 Ariz. at 566,
22, 96 P.3d at 564 (quoting Darner Motor Sales, Inc. v. Universal
Underwriters Ins. Co., 140 Ariz. 383, 397, 682 P.2d 388, 402 (1984)). This duty
is not a contractual duty, however, because it does not arise from a specific
contractual relationship. Instead, it is implied as a matter of law. See id.
Because the special duties professionals such as attorneys and
accountants owe to their clients are implied in law, breaches of these duties
are generally recognized as torts. Barmat, 155 Ariz. at 523, 747 P.2d 1222.
13
In Barmat, our supreme court explained that claims for
breaches of duties implied in law sound in tort, rather than in contract.
Barmat, 155 Ariz. at 523, 747 P.2d at 1222. That case involved a clients
malpractice suit against a lawyer. The client claimed that the lawyer had
breached his duty to render competent and ethical service. Id. at 521, 747
P.2d at 1220. In order to stand under the relevant statute, the clients claim
had to arise out of an express or implied contract. Id. at 523, 747 P.2d at
1222. The Arizona Supreme Court held that although a contract between
an attorney and a client includes an implied covenant to provide competent
service, that covenant is implied in law, not in fact. Id. at 52122, 747 P.2d
at 122021. Therefore, the claim did not arise out of a contract. Id. at 524,
747 P.2d at 1223. Similarly, an insurance brokers duty to exercise
reasonable care in procuring an insurance policy arises as a matter of law.
Claims alleging a breach of that duty therefore sound in tort and not in
contract.
5
14
A promise to procure insurance may, however, sound in
contract if all requirements of contract formation are satisfied. Premium
Cigars, 208 Ariz. at 568, 35, 96 P.3d at 566. The purported contract for
insurance must be supported by sufficient specification of terms so that
the obligations involved can be ascertained. Regal Homes, Inc. v. CNA Ins.,
217 Ariz. 159, 166, 29, 171 P.3d 610, 617 (App. 2007) (quoting Savoca
Masonry Co. v. Homes & Son Const. Co., 112 Ariz. 392, 394, 542 P.2d 817, 819
(1975)). A sufficiently specific contract for insurance must include all the
essential terms of the policy, including the subject of insurance, the duration
of coverage, and the policy premium. See Gulf Ins. Co. v. Grisham, 126 Ariz.
123, 125, 613 P.2d 283, 285 (1980).
15
We agree with the contention in Deepwaters answering brief
that the agreement in this case was an agreement to procure insurance:
The essential terms of the contract between the parties were that Golucci,
on behalf of Wells Fargo, promised, by noon on October 29th, to obtain the
insurance policy placement Deepwater needed to meet the Badger Oil
requirements. It was not an agreement on the terms of one or more specific
insurance policies. Michael Fennesy testified that Golucci offered to
procure insurance for Deepwater and that Deepwater accepted this offer.
As a result, Wells Fargo undertook, as a matter of law, a duty to exercise
reasonable care in procuring an insurance policy. But in the absence of any
sufficiently specific agreement regarding the insurance company, the extent
and duration of coverage, and the policy premium, Wells Fargo had no
greater contractual obligation as a result of Goluccis alleged promise. It
had the usual duty to exercise reasonable care, which it assumed as a matter
of law. Any claim Deepwater may have as a result of the breach of this duty
is therefore a tort claim, not a contract claim. See Barmat, 155 Ariz. at 523,
747 P.2d at 1222; see also Travelers Ins. Co. v. Breese, 138 Ariz. 508, 511, 675
P.2d 1327, 1330 (App. 1983) (A promise lacks consideration if the promisee
is under a preexisting duty to counter-perform.).
16
Deepwater, by failing to prove the existence of the elements
necessary to form a contract for insurance, did not present evidence
sufficient to support a breach of contract claim. Any claim Deepwater may
possess from Wells Fargos failure to procure insurance sounds in tort, not
contract. Accordingly, the trial court erred in denying Wells Fargos motion
for JMOL on Deepwaters breach of contract claim.
17
Wells Fargo also argues that, because any alleged damage is
purely pecuniary, Deepwaters negligence claim is barred by the economic
loss doctrine. The economic loss doctrine, however, applies only when the
parties have entered into a contract defining their relationship. See Sullivan
v. Pulte Home Corp., 232 Ariz. 344, 346, 9, 306 P.3d 1, 3 (2013); Flagstaff
Affordable Housing Ltd. Pship v. Design Alliance, Inc., 223 Ariz. 320, 323, 11,
223 P.3d 664, 667 (2010). Because no contractual agreement existed between
the parties in this case, the economic loss doctrine does not apply and the
court correctly denied Wells Fargos motion for JMOL on this issue.
III.
18
At trial, Wells Fargo presented separate proposed jury
instructions regarding Deepwaters contract and tort claims. Wells Fargo
requested the court instruct the jury on whether Deepwater had proven a
claim for negligent misrepresentation. Wells Fargo argues that the court
erred when it did not include these proposed instructions in its final
instructions. We conclude the court did not err in declining to include Wells
Fargos negligent misrepresentation instructions in the final jury
instructions because the specific claims addressed therein were not at issue
in the case.
19
To determine whether proposed instructions were
improperly omitted from the final jury instructions, this court considers the
evidence presented in the light most favorable to support the theory of the
party proposing the instruction. Miller v. Arnal Corp., 129 Ariz. 484, 489, 632
P.2d 987, 992 (App. 1981). In general, a party who requests instructions is
entitled to have them given to the jury if they are legally proper, supported
by the evidence, and pertinent to an important issue. DeMontiney v. Desert
Manor Convalescent Ctr. Inc., 144 Ariz. 6, 10, 695 P.2d 255, 259 (1985). But
requested jury instructions must appropriately address the legal issues
presented.
20
Wells Fargos proposed instructions on negligent
misrepresentation were properly rejected by the trial court because
negligent misrepresentation was not alleged in the case. Wells Fargo claims
that Deepwaters negligence claim is more properly construed as a claim
for negligent misrepresentation. Contrary to Wells Fargos assertions,
however, the gravamen of the tort allegations was not negligent
22
Wells Fargo next argues that the court erred in denying its
motion in limine to preclude any mention of the MSA Deepwater entered
with Badger Oil. We review a trial courts evidentiary rulings for an abuse
of discretion. See Warner v. Southwest Desert Images, LLC, 218 Ariz. 121, 133,
33, 180 P.3d 986, 998 (App. 2008) (reviewing motion seeking to prohibit
presentation of workers compensation benefits at trial).
23
Before Deepwater was able to bid on a specific job with
Badger Oil, it was required to negotiate and sign an MSA with Badger Oil.
Deepwater representative Fennesy clarified the purpose of the MSA during
his deposition, explaining that the agreement was not a contract for any
particular job, but a preliminary outline of Badger Oils requirements for all
jobs: Typically, you need [the MSA] in hand before youre even allowed
to bid. The MSA included, inter alia, detailed requirements regarding the
necessary insurance coverage.
28
Next, Wells Fargo argues that the jury returned an excessive
verdict, necessitating a new trial under Rule 59. The jurys final verdict
awarded Deepwater $1,134,442 in damages on its breach of contract and
negligence claims. Specifically, Wells Fargo argues that this verdict
necessarily included the jurys speculation regarding Deepwaters lost
future profits, contrary to Arizona law.
29
In its briefing, Wells Fargo asserts that Deepwater provided a
reasonable basis for, at most, $521,769.48 in damages.1 Wells Fargo argues
that the $1,134,442 verdict is unsupported by the evidence and must
necessarily be based in substantial part on Deepwaters speculative claim
for lost future profits.2 Wells Fargo further alleges that because Deepwater
did not provide a reasonable basis for an award of lost future profits, the
court erred in denying its motion for a new trial.
30
The grant or denial of a motion for new trial is within the
sound discretion of the trial court, and absent a clear abuse of discretion,
we will not overturn its ruling. Adroit Supply Co. v. Elec. Mut. Liab. Ins. Co.,
112 Ariz. 385, 389, 542 P.2d 810, 814 (1975). A motion for new trial may be
This figure represents the actual expenditures made in preparation for the
cancelled Badger Oil contract ($177,269.48), lost profit on that contract
($130,950), lost profit from the second Badger Oil contract for which
Deepwaters bid was denied ($53,550), and loss of business goodwill
($160,000).
1
10
11
Prejudgment Interest
34
Next, Wells Fargo argues that the trial court erred in
awarding prejudgment interest at bifurcated rates. Because we vacate the
judgment and remand to the trial court for a new trial on damages, we
conclude it is premature for this court to analyze the availability of
prejudgment interest or the applicable interest rate. Such issues are best
addressed by the trial court upon remand. In our discretion, therefore, we
decline to address Wells Fargos argument on this issue.
VII.
35
Finally, Wells Fargo argues that the trial court erred in
denying attorney fees under A.R.S. 12-341.01. Under this statute, a trial
court has broad discretion to award attorney fees to the successful party,
and we will not disturb its decision absent an abuse of that discretion.
Vortex Corp. v. Denkewicz, 235 Ariz. 551, 562, 39, 334 P.3d 734, 745 (App.
2014). Additionally, a party who prevails by successfully defending against
a contract claim, on the basis that no contract existed, is eligible for a
discretionary award of fees under 12-341.01. See Rudinsky v. Harris, 231
Ariz. 95, 101, 27, 290 P.3d 1218, 1224 (App. 2014).
36
Wells Fargo argues the court erred in denying attorney fees in
favor of the individual broker, Greg Golucci. Golucci was dismissed from
the case before the close of trial, and the jury was instructed that Goluccis
individual actions were undertaken in the course and scope of his
employment with Wells Fargo. The trial court determined that such a
dismissal did not make Golucci a prevailing party entitled to attorney
fees. Accordingly, it declined to award attorney fees to Wells Fargo on his
behalf.
37
We discern no abuse of discretion in the trial courts denial of
attorney fees. The court considered the totality of the circumstances and
determined that Deepwater was clearly the prevailing party. Wells Fargo
12
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